FROM the outset, let us be clear that the purview of the Reserve Bank is to come out with the monetary policy, to regulate and monitor the financial services industry and to act as lender of last resort.
By Vince Musewe
Anything outside this statutory mandate is not its responsibility nor should it attempt to be the expert.
It is therefore my contention here that our Reserve Bank should not be involved in diamond polishing, money transfer business or any other business for that matter as this crowds out private industry and creates conflict of interest with the very commercial banks that it is meant to monitor.
I think the legacy of the Gideon Gono era pushed the boundaries of what a central bank’s mandate ought to be.
This is the legacy that the current governor must live with and avoid. Gono’s impulsive policies clearly emasculated this economy and anyone out there who says he saved this economy needs their head examined.
The new governor must be careful. Our measure should then be, as a principle, to avoid situations where the operations of the Reserve Bank are likely to be in competition or conflict with other financial institutions or private sector industry.
That said, I think the governor did raise some valid points with regard to economic policy and these need to be further explored by the relevant authorities.
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In this article I however want to deal with the issue of high prices in Zimbabwe and how they have arisen, so that we do not merely treat the symptoms but the root causes.
The Reserve Bank governor has been very good at describing the common problems we are facing, but unfortunately has understandably avoided prescribing the hard political solutions that must be made to remedy the situation.
In my opinion, the root causes of our high prices are first psychological and then structural.
In my opinion, our high price levels are therefore a symptomatic manifestation of a deep underlying psychological wound experienced by Zimbabweans from hyperinflation, lack of confidence in our institutions and inherent economic structural defect of high input costs.
With regard to the psychological trauma, the perception of value by Zimbabweans is distorted as a result of the traumatic loss and destruction of value and wealth that Zimbabweans went through during the Gono era.
When prices change every hour, the behavioural consequences of how we treat money change and so does our perception of value. This has clearly fuelled short termism, profiteering and the lack of confidence in the banking system as a whole.
This was, of course, further exacerbated when the Reserve Bank itself raided private bank accounts through institutionalised theft in furtherance of the still mysterious national interests.
We now have a confidence issue that cannot be addressed by policy prescriptions and directives, but by the rebuilding of trust by Zimbabweans of State institutions and the government in general. Unfortunately this is unlikely to happen during the Mugabe era.
On the structural causes of high price levels, I think that although freezing wage increases would help, we have to be careful of which wages to freeze. Freezing wages without a commensurate decrease in the cost of living will stifle demand and further result in economic decline.
If the truth be said, I think the issue is not really about the lower wage earners here, but the high salaries and benefits of management both in the public and private sector.
We should rather see salary reduction at the top as opposed to a broad wage freeze. The issue of high executive perks, both in the private and public sector, is our disease in Zimbabwe that continues to contribute significantly to high prices.
The major culprit here is the government itself and the issue of patronage in State enterprises and corruption that continues to drive up the cost of public goods.
The governor correctly points out that our highest cost drivers of doing business in this economy must be reduced.
These are the costs of credit, energy costs, duties and levies, transportation, government red tape, corruption, patronage and non-accountability particularly in the public sector.
If we further drill down, what we will find is that the common denominator why these costs are high is because of excessive management salaries and benefits, patronage and corruption and lack of accountability.
These are the real reasons from which the governor conveniently shies away from and that is to be expected.
Of course, the private sector cannot be exonerated from their contribution to high prices, but I do not think that a directive to reduce prices will work.
As long as the government does not treat the private sector as partners, we will have a problem.
This government must not expect the private sector to implement painful policies while government officials feel no responsibility to change the way they behave and also acknowledge their contribution to our economic decline.
We need a government that is authentic and serious about change first before we can expect business to come to the party.
Our country has lost direction and collective responsibility because we have no vision.
We have no inclusive economic agenda for positive change and our politicians are separated and only look at their own short–term interests. Because of this, citizens have no obligation at all to nation building, but must look after their interests just as the politicians do.
Until we have a new leadership in this country that is dedicated to economic recovery and leads by example, we can listen to as many monetary policy statements as we want, but ultimately we all know that Zimbabwe will go nowhere.
The problem is not that we do not know what must be done; the problem is that nobody is prepared to do what must be done. Vince Musewe is an economist, author and president of Zimbabwe First! You may contact him directly on [email protected]
